EVs Will Drive Changes In F&I Products

As the automotive industry increasingly becomes EV-centric, dealers must change their operations at many levels – including their F&I product offerings. From batteries and powertrains to maintenance and warranty programs, EVs are a completely different animal compared to conventional vehicles. How will this affect traditional paradigms for F&I products and programs? Here are some insightful perspectives from three F&I experts at JM&A Group: Josh Bass, vice president of innovation, Chris May, director of product innovation and intelligence; and Kevin Hull, director of sales and talent services.

Q: Electric vehicles are relatively new to the marketplace and new products tend to be prone to repairs and recalls. Assuming that the early generations of EVs are likely to experience more repairs and recalls, what are the implications for F&I? How can this be leveraged as a selling point for F&I products?

Chris May: Historically, any time there is innovation in the marketplace, there’s a shakeout period where any initial issues that come up may require fixing. Consumers know this and that’s where F&I comes in – it’s about creating a worry-free driving and ownership experience for consumers. Especially as interest grows, there will be various concerns to overcome. In response, we can offer a wide array of F&I protection products to provide customers with an enjoyable EV experience.

Josh Bass: The perception that EVs are more complex vehicles or will require more frequent repairs creates an opportunity for dealers to engage and educate consumers by leveraging F&I product purchases for peace of mind. Some of the key motivators that will drive the purchase of F&I products in EVs are the need to protect the technology components and the desire to avoid potentially costly repairs, which certainly is an element of concern when you talk about new drivetrains. 

Q: Some differences in EV F&I products are obvious – the battery, for instance. But what other types of coverage will F&I products have to offer to address the specific demands of EVs?

Bass: In an EV, the battery represents 30 to 40 percent of the total cost, more than double that of an internal-combustion engine (ICE) vehicle. So pricing structure, risk analysis and overall cost of claims play a role in the type of coverage products provide. All the electric components and systems that support the propulsion of the vehicle need to be considered in product offerings. Technology protection products must also evolve in order to support the more advanced options in all vehicles, and products that protect wheels and other road hazards must consider the inevitable tire degradation and alignment issues caused by the increased weight of EV batteries.

May: Dealers will have to change how they consider buyer motivations and apply those F&I products to the sale. F&I is about understanding the consumer and pairing suitable products to create the right experience. While most products are going to have a lot of similarities to traditional vehicles, there are some nuances in the products themselves that are going to have to change. For example, maintenance programs, service contracts and warranty programs, and whether they include battery coverage or not, are going to play a big role in boosting adoption.

Q: New technology is generally intimidating to many consumers. It also tends to change frequently. How can F&I coverage leverage this as an advantage to consumers?

Kevin Hull: The new technology in EVs is going to change some of the expectations customers have of what F&I should cover. That shift will require updating some of the fundamental dealership processes and placing a renewed emphasis on developing new or enhanced skills and capabilities. Dealerships must have the expertise to handle the new technologies of EVs across sales, service and F&I. Cultivating soft skills like empathy and active listening and technical skills, such as battery-life assessments and in-store vehicle-software updates versus a network-wide update, will help your customers see the advantages F&I coverage offers.

May: Understanding buyer motivations has always been the key to generating great F&I sales. Many EVs have incorporated new technology to differentiate the product and entice buyers into the market. Downstream, this creates both a challenge and an opportunity for dealers. For those customers that are hesitant, having a knowledgeable staff and longer-term comprehensive coverage available should ease those concerns and turn a skeptic into a buyer. On the other hand, there will also be a segment that embraces new technology, and that extends to vehicles, so focusing on products like appearance protection, road hazard & tire coverage, or term care can help maintain residual values and give the buyer the flexibility they’re seeking.

Q: What about the education component for EV F&I – not just for consumers, but also for dealership staff – for issues such as range anxiety and the importance and frequency of regular maintenance in the absence of the benchmark oil change every 5,000 miles? Are there significant barriers that F&I must overcome?

Hull: One of the biggest pieces of F&I is the value that our products bring to a customer throughout the ownership experience. We need to revisit the fundamentals to up-skill our dealership associates on the ins and outs of EV car-buying and servicing. EVs have added new features, elements and technology to the mix. Therefore, we need to communicate, develop and train our associates about the benefits F&I products bring to this new equation for the consumer on an ongoing basis. Dealerships that adapt well will proactively adopt new processes and technologies when faced with change and therefore will stand out from their competition in the OEM and direct-to-consumer space. EV customers are well-informed, so your dealership staff needs to be as well. Having one expert point of contact for EV F&I sales at your dealership will ease sales processes.

Q: Many consumers still wonder whether it’s worth the risk to switch to an EV. How can F&I products help convince them to buy a vehicle with a different powertrain – and in many cases, more sophisticated technology?

May: Anytime there’s a new technology, there’s an adoption curve that goes along with it. Larger scale adoption will come through situational EV experience where more people start to see and experience the vehicles and organically overcome their initial reservations. For EVs, that could be maintenance costs, cost to replace battery systems and overall battery health. To address this long-term, dealers and F&I providers should collect real time information about battery health, range, degradation, charging and overall consumer usage. It’s important to monitor what concerns are arising based on the new technology, and then incorporate solutions within F&I, sales and fixed operations processes.

Bass: Buying an EV is new for most customers at this point, so naturally there will be different questions than their last vehicle purchase. It’s a salesperson’s job to ensure that the customer understands the product, the value and the technology they’re buying. The F&I manager eases the consumer’s concerns about their purchase and ultimate risk. We can overcome those hesitations by reinforcing how proper maintenance, appearance and technology products help protect the overall experience and residual value. For customers who purchase a used EV, technology performance and battery quality are essential to the retail value of the vehicle. Limited warranties on used EVs also will help boost peace of mind that the essential systems in the vehicle are in peak condition and provide extended coverage past the original factory warranty. Like an ICE used vehicle warranty, it adds significant value and trust from a consumer perspective.

Q: As more people buy EVs and as technicians develop more experience servicing them, what are we likely to learn and how is that knowledge likely to change the nature of F&I coverage for EVs?

Hull: We are learning a lot in the service drive. The need for an expert to see, assess and repair any problems is still a key value add for consumers. Leveraging those relationships will ultimately inform and change how EV F&I products are designed and offered. How often drivers come in for maintenance may change, but the relationship with the dealer will remain a crucial element to customers.

Think of it like telemedicine. It’s convenient, but if you have a broken bone, you’ll go to the doctor to get X-rays and a cast. For some of the maintenance pieces of EVs, there still will be a need to go back to the dealership. We need to evaluate those key touchpoints and communications that will get customers to return to the dealership at regular intervals for things such as tire rotations, for instance.

Q: Will F&I coverage for used EVs be different than comparable coverage for used ICE vehicles?

Bass: The terms and coverages will be similar, but there are specific exclusions and inclusions for what’s covered. There are fewer parts to cover in an EV, but all the supporting electrical systems require appropriate coverage. We’ve seen some providers offer used-EV warranties with the vehicle, battery and battery systems treated as separate products. Our viewpoint is that these systems work together and should be handled as a singular protection product. EVs are higher-cost vehicles, so the degradation of the car and battery value will be important to watch, particularly when you consider how to best price products like “gap” protection, where the vehicle value will be important.

Q: Can the current F&I contracts being offered to ICE vehicles be adapted to cover EVs? Rather than separate F&I contracts, could consumers be offered powertrain-agnostic F&I contracts?

May: In the past, the approach has been to adapt ICE F&I products to EVs, hybrids, hydrogen fuel-cell vehicles and more, which we have been doing since 2012. We’ve learned a great deal about the needs of these vehicles and with the emergence of EV powertrains, it’s important to offer unique options.

We launched EV+ Protect™ for two reasons. First, with F&I, customers want to know that certain electric components are specifically covered, so we think a separate, distinct suite of EV products will help. A quality brand can go a long way toward establishing trust and providing reassurance. Second, it enables us to differentiate EV products as we learn more about the experience of EV buyers and their specific needs, so we can enhance offerings and services to that brand’s product suite.

Q: How can F&I contracts designed for EVs build customers’ loyalty to dealerships?

Bass: F&I builds customer loyalty, trust and connection to the dealership, so dealers need to excel at creating consistently great experiences. Associates must be trained to expertly and effectively showcase the value of the product offerings, and with EV, there are greater opportunities for sales and F&I to create innovative processes to build consumer confidence and retention. Examples of this are sharing monthly battery analysis reports with customers and leveraging maintenance visits to strengthen relationships.

Q: How will the frequency of EV repairs and the costs of EVs compare with ICE vehicles? How will that affect F&I coverage?

May: Based on early returns and the way that EVs are manufactured, we expect frequency of issues to be much lower, but the repair severity will be more extreme. We’re monitoring differences in quality among vehicle and battery manufacturers, which will help us determine what changes are needed in the types of coverage.

Because there are many uncertainties in the EV space, we see immense value in platinum service-contract coverage. There is a clear benefit to the customer in having the most comprehensive protection possible when issues arise.

For more information about JM&A Group and EV+ Protect™, visit www.jmagroup.com/ev+

ABOUT THE PANELISTS

JOSH BASS
Vice President of Innovation, JM&A Group
Josh is responsible for leading marketing and product innovation for JM&A Group. He has held leadership roles in corporate enterprise strategy and emerging technology in the energy, ecommerce and automotive industries.

CHRIS MAY
Director of Product Innovation & Intelligence, JM&A Group
Chris joined JM&A Group in 2015 and has held leadership roles in retail strategy, dealership consulting and F&I product innovation. Prior to JM&A Group, Chris spent four years in automotive retail at JM Lexus and AutoNation.

KEVIN HULL
Director of Sales & Talent Services, JM&A Group
Kevin leverages people data and talent optimization to assist dealers in aligning their business, processes and strategies. He previously specialized in establishing sales enablement tools and operational efficiencies at a staffing firm.